D.N.Sinha, J. - (1.) The facts in this case are shortly as follows : For many years the petitioner's firm 'Daulatram Rawatmal (hereinafter referred to as the 'firm') has been carrying on business at No. 178, Harrison Road. Calcutta. For the assessment years 1940-41 to 1945-46 the firm has been assessed in normal course and has paid the amount found due. On or about 30th November, 1954 the case of the petitioner firm was transferred under Section 5 (7A) of the Indian Income-tax Act to the Income-tax Officer, Central Circle VI, Calcutta, being respondent No. 1 in this application. On or about 21st March, 1956 the respondent No. 1 issued notice under Section 34 (1A) of the Indian Income-tax Act for the assessment years 1940-41 to 1945-46 upon the partners of the said firm, on the ground that the said Income-tax Officer had reasons to believe that the income, profits or gains assessable to income tax for several years mentioned in the said notices have partly or wholly escaped assessment and the income, profits, or gains, of the previous years which fall wholly or partly within the period beginning from 1st September, 1939 and ending on 31st March, 1946 and which have escaped assessment, amount to or are likely to amount to Rs. 1,00,000/-or more. Copies of the said notices are annexed to the petition and marked with the letter 'A'. By the aforesaid notices, the partners of the said firm were requested to deliver to the said Income-tax Officer a return of the total income and the total world income assessable for the respective years mentioned in the said notices. On or about 2nd July, 1956 the petitioner firm made an application to this court under Article 226 of the Constitution, inter alia, for quashing the proceedings initiated by the said notices under Section 34 (1A), on the ground that Section 5 (7A) and Section 34 (1A) of the Indian Income-tax Act were ultra vires of the Constitution, particularly Articles 14 and 19 thereof. Thereupon this court issued a rule and granted an interim stay of proceedings. The application came up for hearing before me and on the 9th January, 1958 the application was dismissed and the rule was discharged. In fact, what had happened was that in the meanwhile the Supreme Court held the said sections intra vires. I myself have decided similarly. Thereafter, on the 25th February, 1958 the petitioner wrote to the Income-tax Officer, Central Circle VI, asking for production or inspection of the following documents : "(1) The order of satisfaction of the Central Board of Revenue, as referred to in the said notices under Section 34 (1A) (2) The materials on which the Income-tax Officer had reasons to believe that income during the said period has escaped assessment. (3) The basis on which the Income-tax Officer came to be of the opinion that the amount of the escaped income was likely to amount Rs. 1,00,000/-or more."
(2.) On the 28th February, 1958 the respondent No. 1 informed the petitioner that the reasons recorded for starting the proceedings under Section 34 (1A), could not be given to the petitioner, and the income-tax Officer could not also grant inspection of the records as requested. Thereafter, there was correspondence between the petitioner and the respondent No. 1, but the said respondent persisted in expressing his inability to grant copies of the reasons or inspection of the records as requested. This rule was issued on the 8th July, 1958 upon the respondent to show cause why an order should not be made quashing and/or cancelling the said notices and/or directing the respondent No. 1 to withdraw or recall the said notices and to forbear from giving any further effect thereto. The point that has been taken in this case by the learned Standing Counsel on behalf of the petitioner is a very short one. In order to appreciate it, it would be necessary to set out the relevant part of Section 34 (1A) of the Indian Income-tax Act (hereinafter referred to as the 'Act'). "(1A) if, in the case of any assessee, the Income-tax Officer had reason to believe- (i) that income, profits or gains chargeable to income tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946; (ii) that the income, profits or gains which have so escaped for assessment for any such year or years an amount, or are likely to amount to Rs. 1,00,000/- or more; he may ................ serve on the assessee .............. a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 22 and may proceed to assess or reassess income, profits or gains of the assessee for all or any of the years referred to in Clause (i), ............... Provided that the Income-tax Officer shall not issue a notice under this sub-section unless he has recorded his reason for doing so, and the Central Board of Revenue is satisfied of such reasons recorded that it is a fit case for the issue of such notice; Provided further that any such notice shall be issued after the 31st day of March, 1956."
(3.) The learned Standing Counsel argues that the condition precedent for issuing notice under section 434(1A) of the Act is that the Income-tax Officer has 'reason to believe' that certain facts exist which have been set out above. He must have reason to believe that income, profits or gains chargeable to income tax within a specified period have escaped assessment and that the income, profits or gains which have so escaped assessment amount to, or are likely to amount to, Rs. 1,00,000/- or more. Another condition precedent is that the Income-tax Officer before issuing the notice must record his reasons for doing so and the Central Board of Revenue must be satisfied on such reasons recorded, that it is a fit case for the issue of such notice. The argument is that the expression 'reason to believe' is a well-known expression in law and it means that the assessee can come to court and require the Income-tax Officer to satisfy the court upon sufficient evidence that in fact, there did exist reasons which would induce a reasonable man to believe that the conditions precedent for the issue of a notice under Section 34(1A) had been satisfied. In other words, if the expression used is "if in the opinion of the Income-tax Officer" certain facts existed, then the matter would be left to the subjective satisfaction of the Income-tax Officer and would not be justiciable, and the court could not go into the matter. On the other hand, where the expression used is 'has reason to believe', it means that such reason must exist objectively. It is conceded that if the Income-tax Officer honestly came to the belief that the conditions precedent, as set out in Section 34(1A) were satisfied, then the court cannot hold that he should not have done so. It is, however, argued that the assessee is entitled to ask the court to compel the Income-tax Officer to disclose the reasons and the materials upon which it is based, so that the court may consider whether upon such materials, a reasonable man could arrive at that conclusion. The object in making this application is, therefore, quite plain, namely to compel the Income-tax Officer to disclose the reasons which induced him to arrive at the opinion that income, profits and gains etc. had escaped assessment during the specified period and/or that the amount thereof would exceed Rs. 1,00,000/- or more. It is an attempt also to have an inspection of the order of the Central Board of Revenue. The attitude taken on behalf of the respondents as disclosed in the affidavit originally filed was that the petitioners have no right to inspect the records or any evidence produced before the Income-tax Officer. This was Stated in an affidavit in opposition filed by S. K. Sarma, Income-tax Officer, Central Circle XXII, Calcutta, who had no personal knowledge of the facts of the case and was not the Income-tax Officer who issued the notices or obtained sanction for the issue thereof. Indeed, the affidavit was partly based on information derived from the records and the rest being submissions to the court. Subsequently, however, the Income-tax Officer who actually issued the impugned notices and obtained sanction thereof from the Central Board of Revenue has affirmed an affidavit dated 28th January, 1959 and an affidavit dated 23rd March, 1959. In the said affidavits he has stated as follows : -- (1) That at the material time he had in his possession considerable materials which led him to believe that income, profits and gains of the petitioner firm amounting to several lacks of rupees chargeable to income tax, had escaped assessment for the years 1940-41 to 1945-46. (2) That he recorded his reasons for the aforesaid belief in writing and on the said reasons the Central Board of Revenue was satisfied that the present case was a fit case for issue of notice under Section 34(1A) of the Income-tax Act. A copy of the relevant memorandum regarding the satisfaction of the Central Board of Revenue dated 9-3-1956 is annexed to the affidavit affirmed on the 28th January, 1959. (3) That disclosure of the said reasons to the assessee at any stage prior to his compliance, with the notice under Section 24(4) and Section 23(2) of the Indian Income-tax Act would be highly detrimental to the interests of the Income-tax Department and will completely frustrate the very object underlying the initiation of proceedings under the aforesaid impugned notices. (4) That the relevant records relating to the petitioner will be made available only to the court for inspection of the said records if the court so desires. (5) That the adequacy of the said reasons for the purpose of issuing the said notice is not a matter for consideration of the court. (6) That he had formed his belief on the basis of the reasons aforesaid as an honest and reasonable person and not arbitrarily, illegally or mala fide,;